"It's not going to go down in history as a great day for Spanish banks," said Investec analysts Elisabeth Afseth and Brian Barry.

Shares of Spain's largest bank, Bankia, plummeted 14% Thursday over fears that Spaniards would make a run on the nationalized bank. But the stock recovered Friday after Bankia reportedly said depositers "have nothing to fear." The bank's stock surged 23.5% at the close.

The Hang Seng (HSI) in Hong Kong closed down 1.3% and the Nikkei (N225) in Tokyo plummeted 3% at the close.

The Deutsche Bank analysts said the Asian markets were "reacting to further signs of slowdown in China," noting that home prices are falling in most Chinese cities and that the China Securities Journal projects a slowdown in GDP to 7.5% in the second quarter.